Small firms may hold key to healthcare

Pat Lawrence’s bustling catering business in San Francisco is so small she doesn’t think she can afford health insurance. So when her face suddenly became paralyzed one morning as she was baking muffins, she went to the Internet for a diagnosis -- not to a doctor or a hospital.

She feared she’d had a stroke, Lawrence said later, but also feared the cost of immediate medical attention.

Jim Henderson, the second-generation proprietor of a seven-person construction supply business in St. Louis, prides himself on offering healthcare to his employees. But the premiums cost more than anything in his budget except the payroll. So benefits have been whittled down, and Henderson wonders how long he can keep covering his workers.

As presidential candidates debate what to do about the 47 million Americans without health insurance and the millions more who worry about the rising cost of their insurance, small companies like Lawrence’s and Henderson’s are at the core of both the policy problem and the thorniest political challenge.

Though most large companies offer coverage, the cost is prohibitive for many small firms. Companies with fewer than 100 workers account for nearly two-thirds of the working uninsured and about 40% of all workers. Even among the small companies that offer coverage, many protect just the worker, not a spouse or children. So in terms of policymaking, it will be almost impossible to reduce the number of uninsured substantially without involving those who work for small firms.

In political terms, small-business owners are a powerful lobbying force, and winning their support for significant changes may not be easy.

Like Democrats, many small-business owners place the lack of affordable healthcare among the top domestic issues, second only to the economy. Like Republicans, however, they are wary of taxes and government-imposed solutions. Once seen as a solid GOP constituency, small business is being wooed by the Democratic candidates, who are offering to tweak their healthcare plans to make them more appealing.

The verdict of small-business owners could lift or sink the next president’s healthcare reform plan. They have a grass-roots network in every congressional district in the country. And in 1994, opposition from the National Federation of Independent Business, their chief lobbying group, played a pivotal role in scuttling then-President Clinton’s health plan.

This time -- as in the 1990s -- the political debate has focused on covering the uninsured, but cost is what troubles small business the most.

When the 350,000-member federation of independent businesses polled its members this year, only 9% said expanding coverage was the most serious issue facing the healthcare system; 74% said the issue was cost.

“The politicians’ problem is coverage. Ours is cost,” said Denny Dennis, the group’s research director. “If they can’t help us with cost, how can we help them with coverage?”

Predictably, the poll found little support among business owners for requiring employers to cover their workers. But it found surprising openness to a key Democratic proposal: requiring individuals to obtain health insurance on their own. Fifty-seven percent of federation members said they would support such an individual mandate; 40% opposed it.

The idea is a cornerstone of universal coverage plans by two Democrats: Sen. Hillary Rodham Clinton of New York and former Sen. John Edwards of North Carolina.

“The individual mandate is attractive in that it sounds like it could get their employees coverage, and it wouldn’t require [employers] to contribute very much,” said Robert Blendon, a public opinion expert at the Harvard School of Public Health.

Todd Stottlemyer, president of the small-business federation, is talking with Clinton -- the group’s former adversary -- as he is with all the candidates.

“In her plan there is a recognition around the importance of small business,” Stottlemyer said, adding that Clinton has promised to exempt most small businesses from her proposed requirement that employers help pay for coverage.

Neera Tanden, Clinton’s health policy director, said the exemption could apply to companies with as many as 50 employees, though the details would be worked out with Congress. That would exempt more than 90% of small companies. Clinton is also offering tax credits to small firms that voluntarily provide coverage, as many already do.

“We wanted a plan that brought in the small-business employer,” Tanden said.

Dynamic Sales Co., Henderson’s construction supply company, was founded by his father, Wayne, in 1966. It is typical of small businesses in many ways.

There was a time when the company paid the entire health insurance premium for its employees and their families. There was no annual deductible. That was a long time ago.

Now the cost of premiums gets split: The company pays 70% and employees 30%. Employees pay the full premium for a spouse or children.

To avoid a steep hike in premiums last year, Henderson went to a plan that more than doubled the annual deductible, raising it to $2,500 from $1,000. But the company put up $1,500 for each employee in the plan. Employees pay the first $1,000 in costs, and the company the next $1,500. Insurance kicks in after $2,500.

“I am having to weigh the company’s best interest and the employees’ best interest,” Henderson said. “Obviously, I’ve got to look out for the company first -- otherwise I wouldn’t have any employees.”

In 2000, Dynamic Sales was paying $1,705.90 a month to cover six employees in a plan with a $100 annual deductible. For 2007, the monthly premium for five employees was $2,769.93 -- with a $2,500 annual deductible.

For 2008, Henderson is facing a 17% premium increase. He would like to stop providing health insurance.

“It’s not that I don’t want to provide the benefit to our employees -- it makes us competitive in the [labor] market,” Henderson said. “But I don’t believe it’s the employer’s responsibility to provide health insurance. I don’t provide auto insurance. I don’t provide home insurance. I believe insurance should be something the employee owns.”

Henderson said he would like to see a national market for health insurance, through which individuals and small businesses could pool their purchasing power to leverage lower prices than are now available at the state level. Candidates generally support this idea -- but Democrats and Republicans would write the rules far differently.

Lawrence, the caterer, is also skeptical of campaign promises, but unlike Henderson she remains uninsured. Hearty Fare, the company she started more than 12 years ago, has two steady employees and a fluctuating number of contract workers. One of her employees is covered under a spouse’s plan. The other is uninsured.

From time to time, Lawrence shops for health insurance, but she hasn’t been able to find a quality plan that she can afford. She came close to signing up with a health maintenance organization, but it cost almost as much as traditional insurance and didn’t offer her a personal physician.

“I drive an old car, and I don’t go on vacation. It’s not like I can give up something to afford health insurance,” she said.

Because she is uninsured, Lawrence doesn’t get regular checkups. She hit her 50th birthday recently, and that has heightened her sense of vulnerability. “I actually recognize that responsible human beings -- particularly as we start getting older -- need to have some baseline reading on health matters,” she said. “I know I need to have a mammogram. I know I need to do that.”

Lawrence’s facial paralysis happened one morning as she was cooking a breakfast spread for a client. She couldn’t close her right eye and had trouble moving the muscles on that side of her face.

“I need to go turn on the Internet,” she remembers telling an employee. After she typed in her symptoms, she recounted, “it said Bell’s palsy,” a temporary paralysis from inflammation of a facial nerve. Her problem eventually cleared up.

If the Internet search had indicated it was a stroke, Lawrence said, she would have gone straight to the emergency room.

“I have too many people who depend on me to mess around with my health,” she said. “And I know it sounds like I am messing around with my health.”

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ricardo.alonso-zaldivar@latimes.com